Modifications to Chapter IV of the Master Circular for Debenture Trustees dated August 13, 2025
Summary
This circular modifies Chapter IV of the Master Circular for Debenture Trustees to explicitly define the utilization of the Recovery Expense Fund (REF). It establishes that prior consent from debenture holders is not required for enforcement and legal proceedings listed in the modified provisions. The Designated Stock Exchange is mandated to release REF amounts within five working days upon receipt of intimation and auditor certification.
Text
In order to enable the Debenture Trustee to take prompt action for enforcement/ legal proceedings in case of ‘default’ in listed debt securities, a ‘Recovery Expense Fund’ (REF) shall be created by issuer which shall be used by Debenture Trustee under guidelines provided below.
In the event of default, the Debenture Trustee/ Lead Debenture Trustee may get reimbursed from the REF for all the related activities for enforcement/ legal proceedings including but not limited to obtaining various consents from debenture holders, voting process, holding of meetings of debenture holders, filing court applications, legal fees, expenses for asset recovery services, appointment of legal consultants in respect of enforcement/ legal proceedings in the event of default.
In case the utilization of REF is for purposes explicitly specified under paragraph 2.1 above, prior approval from the debenture holders shall not be required. Debenture Trustee shall intimate debenture holders through mail and upload on its website regarding the reimbursement from REF.
In case the utilization of REF is for purposes other than explicitly mentioned in paragraph 2.1 above, the Debenture Trustee/ Lead Debenture Trustee shall obtain prior consent of the holders of the debt securities and shall inform the same to the Designated Stock Exchange.
Debenture Trustee shall inform the Designated Stock Exchange to release the amount from the REF and submit an independent auditor’s certificate regarding the expenses incurred to the Stock Exchange, which shall be verified by the Stock Exchange before release of the amount from the REF to the DT.
The Designated Stock Exchange shall release the amount lying in the REF to the Debenture Trustee/ Lead Debenture Trustee within five working days of receipt of such intimation.
Lead Debenture Trustee shall mean: a. A Debenture Trustee who is chosen as the Lead Debenture Trustee by other Debenture Trustees; or b. A Debenture Trustee who represents holders of more than 50% of the outstanding value of debt securities.
The Debenture Trustee shall keep a proper account of all expenses incurred out of the funds received from REF.
The Debenture Trustee shall on an annual basis update the debenture holders regarding the utilization of such funds.
The provisions of this circular shall come into effect immediately.
This circular is issued in exercise of powers conferred under Section 11(1) of Securities and Exchange Board of India Act, 1992, Regulation 2A of the SEBI (Debenture Trustees) Regulations 1993, Regulation 101 of the SEBI (Listing Obligations and Disclsoure Requirements) Regulations, 2015, and Regulation 55 of the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021.
Source: SecMarx — Modifications to Chapter IV of the Master Circular for Debenture Trustees dated August 13, 2025. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.